Using the indirect method, depreciation expense for the period
A) is deducted from profit.
B) causes cash to increase.
C) causes cash to decrease.
D) is added to profit.

Question

Quizplus · Accepted Answer

Depreciation expense does not affect cash flow directly; it is a non-cash expense. Therefore, when preparing a cash flow statement using the indirect method, depreciation expense is added back to net income to adjust for the fact that it reduced net income but did not involve an actual outflow of cash.

Using the Indirect Method, Depreciation Expense for the Period